Billions of rands in pensions have not been paid in South Africa

[Nat Quinn]

The Financial Sector Conduct Authority (FCSA) says over 5,000 employers in South Africa have failed to pay retirement fund contributions.

The FCSA said that 5,430 employers have contravened section 13A of the Pension Funds Act (PFA) – which prescribes the way in which payments and other benefits should be made to a retirement fund.

The FCSA said that 28% of employers have more than one month outstanding, 24% have between two and 12 months, 23% have between 13 to 60 months, and 25% have 60 months or more.

According to the PFA, employers need to pay the prescribed contributions to a retirement fund within seven days of the due date.

“Failure to pay over contributions as required is not only a contravention of the PFA but leads to prejudice and unfair outcomes for members,’ the FSCA said.

Not only are retirement benefits impacted through this contravention, but risk benefits payable to the members are also impacted.

“If the employer does not pay over contributions for a period of 3 months, the insurer will repudiate the claim on the basis of outstanding premiums and the dependents, in the case of a death benefit, will not be paid the insured portion of the death benefit payable from the fund,” the FSCA said.

Preliminary statistics from the FSCA state that municipalities and the private sector have approximately R1 billion and R6 billion in area contributions, respectively.

“Whilst financial difficulties faced by municipalities and the effects of Covid-19 on the economy are public knowledge, employers still have an obligation to their employees to pay over-deducted contributions and employers to the retirement fund as per the PFA,” the FSCA said.

The Boards of retirement funds have the duty to recover outstanding contributions for employers.

As per Conduct Standard 1 of 2022, Boards of retirement funds have to report material contraventions to the affected members and the FSCA.

If the contravention lasts for a period of 90 days, the Boards must approach the South African Police Service to lay charges against the employer.

“The FSCA is continuing to engage with the relevant authorities to ensure that the criminal element of this contravention is effective.”

However, it stated that affected employees should first approach their employers before the relevant retirement fund.

The 3,262 companies with over four months of outstanding pension contributions are listed below (mobile users can click on this hyperlink)

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SOURCE:Billions of rands in pensions have not been paid in South Africa – BusinessTech

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